Market Outlook

Given the type of year it’s been, Trump’s announcement that he and Melania tested positive for the virus seems to be par for the course. Futures markets fell 2% on the news. This follows gains of 5% this past week and losses of 4% the previous week. Amid all this volatility, stock prices are where they were three months ago.

The CDC recently released its latest estimates of the chances of survival at 95% if a person over 70 gets the virus. The odds the President and Melania will recover are much higher than 95% since they don’t have other health issues. This development is not a reason to sell stocks.

Stocks have been moving sideways for three months. The movement is constructive. It allows for the long-term upward trend in earnings to improve the valuation of stocks. At this point, the best strategy continues to be to stay put amid the market’s short-term volatility.

A Look Back

While some of the recent economic news shows signs the economy might be slowing, most of the indicators point to the overall economy increasing at a healthy pace.

Yesterday’s report on wages and spending shows gains of about 1% for the month. The gains brought wages and spending to 96% of their peaks reached in February.

Today’s employment shows private jobs in September increased by 877,000, a 0.7% increase from August. Total hours worked increased by 1.2%. This means the economy in September may have matched the strong 1% gain it experienced in August.

Another sign the economy continued to rebound in September was the strong performance reflected in the ISM’s survey of manufacturing. The overall index remained in the mid-50s, while new orders continued to register a strong reading of 60. The survey shows no increase in manufacturing jobs, but also shows jobs were no longer declining. The high reading for new orders points to likely job increases in the future.

There has been some progress in weekly employment numbers during September. Initial unemployment claims at the end of the month were down only slightly from the beginning of the month. However, insured unemployment payments in mid-September went to 11.8 million, about 3 million less than in mid-August. The insured unemployment rate was 8.1%, down from 9.1 in mid-August.

What to expect this coming week

The key report next week will be Monday’s ISM survey for service companies. The August report had an overall strong reading of 62 and a healthy reading of 57 for new orders. If September’s numbers are as good or better than August, it suggests the economy continued to performed better than some of the employment data might suggest.

COVID-19: Daily Death Rates Trend Lower

The following chart show daily cases and deaths in the US through yesterday.

The Lighter Side of Political Economy

State With No Electricity Orders Everyone to Drive Cars that Run on Electricity—Babylon Bee

SACRAMENTO, CA—Gavin Newsom, governor of the state with the highest people-to-electricity ratio in the nation, banned gasoline cars yesterday via executive order. The order takes effect in 2035, meaning by that time, everyone in the state with no electricity will only be able to plug in their cars to the power grid that does not work.

Forces Impacting the Near-term Outlook for Stock Prices
Economic Fundamentals:  positive
Stock Valuation:  0% appropriately valued
Monetary Policy:  highly expansive
Stock Exposure:  90%